CASS 5.4 Non-statutory
client money trust

Introduction

CASS
5.4 permits a firm, which
has adequate resources, systems and controls, to declare a trust on terms
which expressly authorise it, in its capacity as trustee, to make advances
of credit to the firm'sclients. The client
money trust required by CASS
5.4 extends to such debt obligations
which will arise if the firm,
as trustee, makes credit advances, to enable a client's3premium obligations
to be met before the premium is
remitted to the firm and similarly
if it allows claims and premium refunds
to be paid to the client before
receiving remittance of those monies from
the insurance undertaking.

Conditions for using
the non-statutory client money trust

A firm may
not handle client money in accordance
with the rules in this section
unless each of the following conditions is satisfied:

(1)

the firm must have and maintain systems and controls
which are adequate to ensure that the firm is
able to monitor and manage its client money transactions
and any credit risk arising from the operation of the trust arrangement and,
if in accordance with CASS 5.4.2 R a firm complies
with both the rules in CASS
5.3 and CASS
5.4, such systems and controls
must extend to both arrangements;

(2)

the firm must obtain, and keep current, written
confirmation from its auditor that it has in place systems and controls which
are adequate to meet the requirements in (1);

(3)

the firm must designate a manager with
responsibility for overseeing the firm's day
to day compliance with the systems and controls in (1) and the rules in this section;

(4)

the firm (if, under the terms of the non-statutory
trust, it is to handle client money for retail customers) must have and at all times
maintain capital resources of not less than £50,000 calculated in accordance
with 2MIPRU 4.4.1 R; and

Client money to be
received under the non-statutory client money trust

Except to the extent that a firm acts in accordance with CASS
5.3,
a1firm must not receive
or hold any client money unless
it does so as trustee (or, in Scotland, as agent) and has properly executed
a deed (or equivalent formal document) to that effect.